France probes Nestle, Danine over baby formula toxins: What to know

The crisis over contaminated baby food has escalated over product recalls in recent weeks. On Friday, the Paris prosecutor said he had launched an investigation into five companies that produced the formula. Parents and investors are nervous.

The investigation concerns possibly contaminated infant nutrition products distributed by the world’s three largest dairy groups. Nestlé, Danoneand the exclusive Lactalis, as well as smaller brands Babybio and La Marque en Moins.

The recalls were due to possible contamination with cerulide, a heat-stable toxin that can cause nausea, vomiting and diarrhea when consumed. Although symptoms usually improve within a day, they can lead to more serious complications.

According to the translated statement, the Paris prosecutor said he had opened his investigations for “deception regarding goods that pose a danger to human health”, a crime punishable by up to seven years in prison and a fine of up to 3.75 million euros ($4.45 million). CNBC has reached out to the companies mentioned for comment.

In January, Nestle CEO Philipp Navratil said he was sorry for the concern and disruption this was causing parents and customers. “I can assure you that your safety and well-being is our top priority,” he said.

It was stated that the prosecutor’s office took up the case due to the large number of complaints across the country.

Additionally, the French Ministry of Health is investigating three reported infant deaths in cases where consumption of infant formula was reportedly affected by the recall. On February 11, it was stated that no causal link could be established regarding the incident and that judicial investigations were continuing.

Nestle released a “series of events” on January 29It said it found traces of cerulite in some batches of finished products at its factory in the Netherlands in early December.

According to the company’s timeline, on December 10, the company notified Dutch authorities, the European Commission and potentially affected countries about the potential risks, adding that it initiated recalls on the same day of all batches of 25 products produced in 16 countries in Europe.

In January, the Swiss company issued the first major public recall across Europe for its SMA, Beba and Little Steps brands, followed by French peers Danone and Lactalis, makers of best-selling Aptamil and Cow & Gate.

So far, recalls have occurred in more than 60 countries.

Nestle said the source of the contamination was traced to the ingredient supplier of arachidonic acid (ARA) oil, which is often added to baby food.

This problem has grown larger over time, as many different companies and multiple brands use this supplier. The supplier is not officially named. UK Food Standards Agency says supplier of ARA oil is no longer used by Nestle or Danone

Still, he urged parents and caregivers to check whether the formula products they have in their homes are among the groups listed in the recall.

on February 2 European Food Safety Authority Adjust the threshold level of the toxin cerulidine. Barclays analyst Warren Ackerman said there had been no harmonized standard before because of its rarity.

Earlier this month, UK officials said: They had received at least 36 clinical reports of infants showing symptoms consistent with cerulide poisoning.

Nestle’s baby food accounts for about 5 percent of revenue, and the company said the recalled products represent only 0.5 percent of revenue. “Given the potential consumer confusion and brand value risk, a larger figure of 5% is probably more meaningful,” Bernstein analyst Callum Elliott said in January.

“Baby food is more important to Danone, accounting for around 21% of group revenues in our estimates and more than that in terms of profitability.”

Nestle and Danone are scheduled to report earnings later this week, and investors are hoping to get a better picture of the financial impact of these recalls.

As investors worry about financial consequences and potential reputational damage, Nestle shares are up 1.7% year-to-date, while Danone shares are down 5.5%. Pan-European Stoxx 600 The index increased by 4.6% in the same period.